Comparing Job Offers: How to Value Salary, RSUs, and Stock Options

When comparing two job offers, it is tempting to focus on the total compensation number. One company offers a $200,000 salary and $100,000 in stock. Another offers a $180,000 salary, a larger equity grant, and the possibility of significant future upside. At first glance, the second offer might look more attractive. But how much are those stock awards worth, and how should you compare them with compensation you can count on receiving?

For employees who receive restricted stock units (RSUs), incentive stock options (ISOs), or nonqualified stock options (NQSOs), evaluating a job offer requires looking beyond the headline compensation figure. The type of equity, vesting schedule, liquidity, and risk can all influence the value of the package. A thoughtful comparison can help you determine which offer better supports your financial goals, rather than choosing the one with the largest number on paper.

Start With the Compensation You Can Count On

Base salary is usually the easiest part of an offer to compare. If one company offers $200,000 and another offers $180,000, the first provides $20,000 more in annual base pay. That can help cover living expenses or fund investment accounts.

Bonuses require a little more caution. An offer might include a target bonus of 20% of salary, but the actual payout could vary depending on conditions like individual performance or company results. A target bonus should not be treated as guaranteed compensation. Review how bonuses are determined and whether the company has a history of paying them at the stated target.

Sign on bonuses can also make an offer appear more attractive, especially when a company wants to offset compensation you would forfeit by leaving your current employer. However, these payments are often one time benefits and may come with repayment requirements if you leave within a specified period.

Start by comparing the recurring components of each offer, then separately account for bonuses and other temporary or performance dependent payments.

Public Company RSUs Have a More Observable Value

RSUs are a common component of compensation at publicly traded companies. When RSUs vest, they convert into shares of company stock. The shares have a market price, which makes it easier to estimate their current value than it would be for options in a private company.

Suppose Company A offers a $200,000 salary and $100,000 in RSUs that vest over four years. If the grant is divided evenly across the vesting period, the initial grant represents approximately $25,000 in equity per year, before considering changes in the stock price and the actual vesting terms.

That does not mean you will receive exactly $25,000 each year. The value of the shares delivered at vesting depends on the stock price at that time. If the share price rises, the compensation may be worth more than expected. If the price falls, the value may be lower.

It is also important to understand whether the stated grant amount is a one time award or whether the company has a regular process for granting additional equity. Some employers make annual refresh grants to retain employees, but future grants are not necessarily guaranteed unless the compensation terms provide otherwise.

Public company RSUs can be easier to evaluate because there is an observable market price, but the value of an RSU award should be evaluated based on its vesting schedule and likely economic value, not the amount listed in an offer letter.

Private Company Stock Options Are More Difficult to Value

Stock options introduce another layer of complexity. Rather than receiving shares outright, an employee receives the right to purchase shares at a predetermined exercise price. The potential value depends on how the company performs, the exercise price, the number of options, and whether the employee eventually has an opportunity to sell the shares.

Consider an offer from Company B that includes 20,000 stock options with an exercise price of $5 per share. Exercising all the options would cost $100,000. If the shares eventually become worth $20 each, they would have a gross value of $400,000, creating a $300,000 difference between the share value and the exercise cost.

That example shows the potential upside, but that’s not always the case. The company may be worth less than expected in the future, or the shares may never become liquid. The company may also have different classes of stock with different economic rights, which can affect how value is distributed in a sale or other liquidity event.

The company may provide a valuation, but that does not guarantee an employee can sell shares at that price. Before treating private company options as a meaningful part of a job offer, understand the exercise price, vesting schedule, expiration date, and potential path to liquidity.

It is also worth asking what type of options you are receiving. ISOs and NQSOs have different tax rules, and exercising either can involve financial and tax considerations. You do not need to calculate every possible future outcome to compare job offers, but you should avoid treating the stated number of options as though it were equivalent to the same dollar amount of salary.

Look at the Vesting Schedule

The timing of equity compensation can be just as important as the total amount offered. Two companies might advertise similar equity grants, but the vesting schedules could produce very different outcomes if you leave after one or two years.

For example, one company might offer RSUs that vest gradually each month after an initial one year cliff. Another might offer a large portion of its equity in the first year, with smaller amounts vesting later. A traditional four year schedule might provide 25% of an award after the first year, followed by monthly or quarterly vesting over the remaining three years.

Options also typically vest over time, and unvested options generally cannot be exercised unless the plan permits early exercise. If you leave the company, unvested awards are usually forfeited. Vested options may remain exercisable for a limited period after departure, depending on the plan.

This is especially important when comparing an offer with the compensation you would give up by leaving your current employer. You may have a substantial amount of unvested RSUs or options that will disappear if you resign. A new company may offer a sign on bonus or additional equity to offset that loss, but you should compare the actual value and timing rather than assume the new package replaces what you are giving up.

Don’t Forget About Future Equity Grants

Some companies use recurring equity grants as a part of compensation. You might receive an initial RSU award when you join, followed by additional grants in later years. These can help maintain compensation as earlier grants vest.

When comparing offers, ask if the company has a formal refresh grant program, how frequently employees receive additional equity, and what factors influence the amount. A recruiter might describe a typical annual grant, but a historical practice is not the same as a contractual commitment.

This matters when calculating expected annual compensation. If an offer includes $200,000 in salary and $200,000 in RSUs vesting over four years, it may be misleading to assume the company will continue delivering $50,000 in annual equity indefinitely. The initial grant may decline as it finishes vesting unless new awards are made.

Compare the Offers Under Different Scenarios

Instead of relying on a single total compensation number, consider what each offer might look like under several scenarios.

Imagine Company A offers a $200,000 salary and $100,000 in public company RSUs vesting over four years. Company B offers a $180,000 salary and private company options that could eventually become valuable. Company B may offer more potential upside, but Company A provides a higher salary and equity with a more observable current market value.

Now consider what happens if the private company performs exceptionally well. Company B's options could produce a significant financial benefit. But what if the company takes much longer to go public, its value declines, or it never provides a liquidity opportunity? In that case, the options may be worth much less than anticipated, while the salary difference has been real every year.

Neither offer is automatically better. The point is to recognize that the compensation packages have different levels of certainty and risk. Someone who values predictable cash flow may prefer the higher salary and publicly traded equity. Someone with substantial savings, a long time horizon, and a greater tolerance for risk may be more comfortable accepting lower salary in exchange for potential private company upside.

Your decision should reflect your own financial circumstances rather than the most optimistic projection presented during the hiring process.

Taxes and Benefits Change the Comparison

Compensation should also be evaluated on an after tax and total benefits basis. RSUs generally create ordinary compensation income when they vest, while stock options can have different tax consequences depending on whether they are ISOs or NQSOs and when they are exercised and sold. The timing of these events can affect both cash flow and the amount of tax owed.

Benefits deserve attention, too. Health insurance premiums, retirement plan matching, paid leave, disability coverage, and other benefits can materially affect the value of an offer. A company with a slightly lower salary may provide a stronger retirement match or better benefits, while another may offer a more generous compensation package but less favorable coverage.

You should also consider the practical value of the job itself. Career development, stability, work flexibility, and future earning potential may be more important than a modest difference in projected compensation.

In Closing

Comparing job offers when equity compensation is involved requires more than looking at salary and adding the stated value of stock awards. Public company RSUs, private company options, bonuses, and future equity grants each have different characteristics, and their value depends on timing, risk, and the terms of the award.

Start with the recurring compensation you can reasonably expect, then evaluate the equity based on its structure and the circumstances under which you could benefit from it. Consider the awards you would forfeit by leaving your current employer, the taxes and exercise costs you may face, and how much uncertainty you are comfortable accepting.

The goal is not to choose the offer with the largest potential payout, it is to understand what each company is actually offering and determine which package best supports your financial goals, both today and over the years ahead.

This material is purely intended to be general and educational in nature, and should not be construed as specifically-tailored investment, financial planning, tax, legal, or other professional advice. Information and data contained herein is as-of the date of publication, and may be subject to change in the future without notice. Any investment performance referenced is purely past performance, which is no guarantee of any future performance. Nothing contained herein should be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation of any security or other financial product or investment strategy. All investment, tax, and financial planning strategies involve risk that you should be prepared to bear. You are highly encouraged to consult with professionals of your choosing before taking any action based on this material.